By David Moon, Moon Capital Management
January 27, 2008
The president finally announced his plan to solve our country's economic
woes. He wants to send everyone a check for $800.
The fear I hear most frequently expressed, however,
is that some Americans might simply use the money to pay down debt, thereby
depriving our economy of a much-needed consumer boost.
For the sake of our country, our economy and our
citizens, we should hope that this plan goes back onto some third grader's
Christmas wish list, because that's where it sounds like it originated.
It amazes me that politicians are concerned that
taxpayers might take their newfound $800 windfall and waste it on something
silly, like reducing debt. If you think clearly, unlike a politician, it might
occur to you that one of our problems might be an excess of debt ' say subprime
Where do you think the federal government will get
the $800? It will have to borrow it. If you take your $800 and buy a TV set or a
vacation, you ' the taxpayer ' will be paying for that vacation for the next 30
If you pay off some debt with it, however, you will
at least be swapping debt for debt.
Do you think a lack of consumer spending got us into
The definition of a recession is two consecutive
quarters of negative economic growth. ('Negative economic growth' is one of
those weird oxymorons, like 'fire department' or 'jumbo shrimp.') If we're
slipping into a recession ' and we probably are ' it's certainly not from a lack
of shopping effort by the consumer. We've been spending more than we make since
the beginning of 2006. Homeowners have been using lines of credit to take cash
out of their houses so they could go to restaurants.
Spending more money won't solve the problem;
spending money like a rebellious teenager with a stolen credit card caused the
excesses in the first place.
Imagine for a moment that you have an upcoming
appointment with your doctor for a physical. You're 25 pounds overweight. You're
always overweight. In fact, you're fatter now than you've ever been. Every time
you see the doctor, he encourages you to lose the weight, citing the eventual
blood pressure, heart and insulin problems that could result from your
You have only two weeks until the appointment. If
you start exercising and eating right now, it won't make a dent in your weight
or your overall health in this short a period. So you go on a crash diet. You
drink tea and sit in a steam room for 14 days. You take diuretics. You get a
haircut and rid yourself of anything else that might add unwanted gravitational
pull on the doctor's scales.
In two weeks you lose the 25 pounds.
Within ten days, you gain it all back. Plus a couple
You may have given the impression of health, but by
making a 50-pound round trip in less than a month, you put your body in even
more danger. You have weight problems because you don't treat your body
properly. So how do you address it?
By abusing your body even more.
That is the Bush economic bailout
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).